The corporate regulator is suing former directors of Rex after accusing them of misleading and deceptive conduct over a February 2023 market statement touting an upcoming full-year profit.
The statement wasn't altered until June 20, 10 days before the financial year ended, when the company warned of an ultimate pre-tax $31.7 million operational loss.
Rex had incurred operational losses in the preceding periods leading up to February, including more than $21 million by the end of March, Australian Securities and Investments Commission barrister Michael Borsky KC argued.
The airline's failure to amend the guidance for months constituted a breach of its continuous disclosure obligations, he told a NSW Supreme Court hearing in Sydney.
"The guidance was ... not a tenable position again in the context of a responsible board of a company listed on the Australian Stock Exchange," Mr Borsky said.
Rex's former executive chair Lim Kim Hai already admitted to the allegations during a court hearing last week.
ASIC is seeking penalties and disqualification orders against Mr Lim, then-directors Lincoln Pan and Siddharth Khotkar, and former deputy chair and ex-federal Nationals MP John Sharp.
However, defence lawyers have claimed the initial statement came from a place of optimism or hope for what was possible and debated the various accounting definitions of the loss.
Mr Borsky said the question of having operating profits versus a loss was a binary one.
"This is not the case of profit guidance being reduced, for example, from $100 million to $90 million or $89 million, and then there being questions of whether the 10 per cent threshold was or was not crossed," he told the court.
"If one insists on considering this through the prism of a percentage change in earnings guidance, it is a change of more than 100 per cent because the whole of the previously expected profit is no longer expected, and more, it was going to be a loss."
Rex released the statement on February 28, 2023, claiming it was optimistic the company would turn positive operating profits for the financial year, barring external shocks.
On June 20, the airline pulled the guidance and instead flagged a potential $35 million operational loss, citing a global shortage of pilots and engineers as contributing factors.
The defence has argued ASIC should have to prove the absence of a significant external shock, which the commission's legal team rejected.
Rex fell into administration in 2024 with about $500 million in debt and was later snapped up by US aviation group Air T via administrators EY in October 2025.
The federal government has given extensive assistance to the carrier, including spending $130 million to take over its debts to keep Rex's regional routes operational.
The case continues.
